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ULA Leadership Move Could Be Precursor to Further Changes

Aug. 17, 2014 - 02:47PM   |  
By AARON MEHTA   |   Comments
Michael Gass, president and CEO of United Launch Alliance, stepped down last week. (Jewel Samad / AFP)
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WASHINGTON — An unexpected leadership change at the United Launch Alliance (ULA) may be just the first move for a company facing competition for the first time.

After leading ULA since its inception in 2006, Michael Gass is stepping down. ULA announced the change in a news release on Aug. 12.

Gass is succeeded by Tory Bruno, most recently vice president and general manager of Strategic and Missile Defense Systems at Lockheed Martin. Bruno, in turn, will be replaced by Tim Cahill, who was the vice president of engineering and technology for Lockheed Martin Space Systems.

Bruno’s appointment is effective immediately, but the company announced Gass will “work collaboratively to ensure a smooth leadership transition and continued commitment to mission success” through the end of the year.

In the press release, Lockheed and Boeing — the parent companies of ULA — praised Gass for his leadership, while also highlighting his replacement as an agent of change.

Craig Cooning, president of Boeing Network and Space Systems and a ULA board member, said Bruno is “well-qualified to ensure ULA keeps pace with changing customer needs and launch industry dynamics.”

The announcement put as positive a spin as possible on Gass’ departure, but reading between the lines makes it clear leaders at the parent companies felt a change was needed, said Teal Group analyst Marco Caceres.

“Gass hung his hat on ULA’s track record of successful launches,” Caceres said. But ULA looked complacent when matched against the dynamic Elon Musk, whose SpaceX will shortly begin competing with ULA for military space launches.

During a June press event, Gass acknowledged that his company had not reacted quickly enough to counter Musk’s influence on Congress and the media. The SpaceX CEO has derided ULA as an overly expensive monopoly that takes advantage of taxpayers. To try to counter SpaceX’s claims, ULA began running an ad campaign aimed at congressional leaders.

That campaign wasn’t enough to save Gass’ job, and he may be just the first domino to fall.

Changes at the CEO level are usually accompanied by a change in how business is done, said Byron Callan, an analyst with Capital Alpha Partners.

“Generally, when you see abrupt leadership changes, there’s an abrupt change of strategic or tactical course needed,” Callan said. “You don’t make those changes unless you see something that needs fast corrective action.”

Caceres said he expects to see layoffs and a streamlining of ULA to find all possible cost savings.

“My sense is you’re going to see at ULA a restructuring of some sort, because ultimately they’re going to have to find a way to be a lot more competitive on price,” he said.

The shakeup comes as ULA is facing the first real challenge to its monopoly on military space launch for the Pentagon’s Evolved Expendable Launch Vehicle (EELV) program.

SpaceX expects to be certified for EELV launches by the end of the year. Company officials have insisted they can provide space launches for significantly less cost than ULA’s legacy platforms, the Atlas V and Delta IV rockets.

ULA’s handling of the EELV program, among the Pentagon’s most expensive operations, has also come under scrutiny from Congress for its high cost. Adding to the situation is international pressure from Russia, where an official has suggested the country could cut off sales of the RD-180 engine, which is used in the Atlas V.

“Clearly, ULA is under a lot more competitive stress to change,” Callan said.

While many of those stressors are out of ULA’s control, the company needs to find ways to get costs down. Bruno may be coming in with a mandate to do that by any means necessary.

While ULA may not be able to hit the under-$200-million-per-launch price tag Musk has promised, Caceres said that if the company can get to within $50 million of SpaceX’s proposed costs, it will give the Air Force incentive to keep spreading the launches around.

It is hard to argue that Bruno, a 30-year Lockheed veteran, will bring the same aggressive, outsider approach that SpaceX has capitalized on. But just having a new face could help change the perception of ULA as a plodding, stay-the-course organization with arguably its most important customer: Congress.

“Gass is associated with the age of monopoly, and that’s over,” Caceres said. ■


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